In a landmark decision, a three-judge panel for the DC Circuit Court of Appeals granted Grayscale’s petition for review, effectively ordering the U.S. Securities and Exchange Commission (SEC) to reevaluate its previous denial of Grayscale’s application to convert its Bitcoin Trust into a spot bitcoin exchange-traded fund (ETF). The ruling has garnered significant attention from lawmakers, including Rep. Patrick McHenry, Chair of the House Financial Services Committee, who expressed strong support for Grayscale and criticized the SEC’s approach to crypto regulation.
Grayscale’s legal triumph and what it means for crypto ETFs
Grayscale initially filed a lawsuit against the SEC in June 2022 after the regulatory body rejected its proposal to transition its Bitcoin Trust (GBTC) into an ETF. The court’s decision to grant Grayscale’s petition for review does not guarantee the conversion of GBTC into a spot bitcoin ETF but mandates the SEC to revisit the application. This development has been hailed as a significant step toward regulatory clarity in the crypto asset space, especially concerning ETFs.
The court’s ruling was based on the principle of upholding the rule of law and serving American consumers by vacating what it termed the “arbitrary and capricious” decision of the SEC. This has led to increased optimism among crypto enthusiasts and investors, who see the court’s decision as a positive sign for the future of crypto ETFs in the United States.
Lawmakers weigh in, criticize SEC’s approach to crypto regulation
Rep. Patrick McHenry, who has been a vocal advocate for crypto regulation, took the opportunity to criticize the SEC’s approach. McHenry stated that SEC Chair Gary Gensler’s “crusade against the digital asset ecosystem is falling apart under scrutiny from the courts.”
He also referenced the Financial Innovation and Technology for the 21st Century Act, a bill he introduced that aims to delineate the responsibilities of the SEC and the Commodity Futures Trading Commission (CFTC) in regulating crypto. The bill has already cleared two House committees.
Rep. Warren Davidson and former Senator Pat Toomey also expressed their support for the Grayscale decision, with Davidson reiterating his call to fire Gensler. These lawmakers’ comments reflect a growing sentiment among political figures that the SEC needs to adopt a more balanced and clear approach to crypto regulation.
Coinbase Chief Legal Officer Paul Grewal also commented on the court’s decision, stating that courts remain the crypto industry’s “last, best hope” for protecting the rule of law. This sentiment echoes the broader industry perspective that judicial intervention may be necessary to ensure fair and transparent regulation.